Muthoot Pappachan(1927 - 2004)

Founder Chairman

His vision, enterprise, simplicityand humaneness will forever guide us.

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To be the Most Trusted Financial Service Provider at the Doorstep of the Common Man,

Satisfying him Immediately with Easy and Simple Products.

VISION

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CONTENTS Page No:Corporate Information 9

From the Chairman & Managing Director 13

Message from the Executive Director 23

Notice 25

Directors Report 27

Statement regarding Subsidiary Companies pursuant to Section 129 of the Companies Act, 2013 - AOC-1 76

FINANCIAL STATEMENTS Standalone Independent Auditors Report 84

Balance Sheet 91

Statement of Profit & Loss 92

Statement of Cash Flow 93

Significant Accounting Policies and Notes to Standalone Financial Statements 94

Annexure required under Paragraph 13 of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007 117

Consolidated Independent Auditors Report 125

Consolidated Balance Sheet 133

Consolidated Statement of Profit & Loss 134

Statement of Consolidated Cash Flow 135

Significant Accounting Policies and Notes to Consolidated Financial Statements 136

ENCLOSURESCorporate Social Responsibility (CSR) 163

Attendance Slip and Proxy Form 181

Mr. Thomas John MuthootManaging Director

Mr. Thomas George MuthootDirector

Mr. R. Kamalasanan NairDirector

Ms. Janamma ThomasDirector

Mr. A.P KurianDirector

Mr. Thomas MuthootExecutive Director &

Chief Financial Officer

Mr. A. VikramanDirector

Board of Directors

CorporateInformation

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CORPORATE INFORMATION

Company Secretary and Vice President-Corporate AffairsMr. T. D. Mathai

Chief Financial OfficerMr. Thomas Muthoot

Statutory AuditorsM/s. A. Cherian and AssociatesChartered Accountants

Secretarial AuditorsM/s. SVJS & AssociatesCompany Secretaries

Internal AuditorsM/s. Krishna, Retna and AssociatesChartered Accountants and M/s. Giri Raj R & AssociatesChartered Accountants

Solicitors and AdvocatesDandapani Associates

Legal AdvisorMr. C. M Stephen

Senior ManagementMr. George Lamannil - Executive Director & General CounselMr. S Kannan - Executive Vice PresidentMr. Tojo Jose - Chief Human Resources OfficerMr. P. Padmakumar - Head Industrial Relations and Disciplinary ActionMr. Joseph Oommen - Sr. Vice President- Finance & AccountsMr. N.S Bose - Vice President and Head - OperationsMr. Ninan Varkey - Vice President - Risk ManagementMr. A.V Koshy - Vice President - Risk Management (Branch Audit & Inspection)Mr. K.R Balachandran - Vice President - Administration & InfrastructureMr. ASP Rao - Vice President - Business DevelopmentMs. Deepa Nair - Vice President - Customer Acquisition and ExperienceMr. R. Nadanasabapathy - Vice President - Resource Planning Ms. Devika R - Vice President - Organisational DevelopmentMr. Jayakrishnan - Associate Vice President - IT Dr. Prasanthkumar Nellickal - Head - Corporate Social ResponsibilityMr. Abraham Koshy - Group Security AdvisorMs. Shiney Thomas - Executive Secretary

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BankersState Bank of IndiaThe South Indian Bank Ltd.HDFC Bank Ltd.Axis Bank Ltd.ICICI Bank Ltd.Kotak Mahindra Bank Ltd.The Federal Bank Ltd.City Union Bank Ltd.IDBI Bank Ltd.State Bank of MysoreDena BankAndhra Bank

Debenture TrusteesVistra ITCL (India) Ltd.(Formerly IL & FS Trust Company Ltd.) The IL&FS Financial Centre, Plot C- 22, G Block, Bandra Kurla Complex, Bandra(E), Mumbai 400051

SBICAP Trustee Company LimitedApeejay House, 6th Floor,3, Dinshaw Wachha Road, Churchgate, Mumbai - 400 020

CA G Mohan Kumar, FCAandCA M. Unnikrishnan, ACA, Revathi, TC 2/1756, GRA 717, Gowreesapattom,Trivandrum - 695 004

Dhanlaxmi Bank Ltd.IndusInd Bank Ltd.Punjab National BankKarnataka Bank Ltd.Central Bank of IndiaUnion Bank of India Indian Overseas BankState Bank of TravancoreThe Jammu & Kashmir Bank Ltd.SICOM Ltd.State Bank of Patiala

The Catholic Syrian Bank Ltd.Vijaya BankBank of IndiaOriental Bank of CommerceCorporation BankCanara BankAllahabad BankLekshmi Vilas BankState Bank of HyderabadKarur Vysya BankBank of Maharashtra

Registered OfficeMuthoot Centre, Punnen Road,Thiruvananthapuram - 695 039Ph: + 91 471 2331427 / 3911400Fax: + 91 471 2331560Email: muthoot@muthoot.comWebsite: www.muthootfincorp.com

Registrar & Transfer AgentIntegrated Enterprises (India) LimitedIInd Floor, Kences Towers, No: 1, Ramakrishna Street, North Usman Road, T Nagar, Chennai - 600017

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During the Financial year 2015-16, I am happy to inform, your Company had weathered many challenges successfully in the disconcerting macro-economic environment in the country and is currently placed on a profitable and responsible growth trajectory, on the back of sustained performance and unflagging optimism. Despite a highly challenging business environment and the market economic environment remaining subdued, your Company exhibiting resilience and with the help of well-crafted and successfully implemented business model clocked the 21,28,977 lakhs rupees mark of business during the year by driving innovations across brands and operations and aggressively pursuing the go-to market strategies.

Macro-Economic Environment- FY 2015-16

Signals from the global economy continued to be muted and sluggish in the Financial Year 2015-16. The lacklustre growth of 1% of US economy in the last quarter of 2015, a mere 0.3% growth in Eurozone mainly on account of the low growth in Germany and France and the shrinking of Japanese economy are the

Mr. Thomas John Muthoot

Message from the Chairman and Managing Director

disappointing and also disquieting signs of the global economic trend. The contraction in Chinas GDP due to its conscious strategy to rebalance the economy towards consumption, sequel to its stock market crash in June in enormous proportion, will accentuate this trend. This rebalancing of its economy by China will impact the GDP of many economies who relied on exporting raw materials to China. Further, the ongoing structural slowdown in China has depressed the demand for oil, iron-ore and other commodities, there-by dragging down growth in Brazil, Australia and other Commodity Suppliers. With the Chinese economy undergoing structural adjustments, the devaluation of Yuan was natural causing financial turbulence. Global economic growth for the calendar years 2016 and 2017 is expected to see only a gradual perking up. The forecast has projected the global economic growth at 2.9%. It is projected to increase further beyond 2017 to just below 4% by the end of the forecast horizon in 2021 reflecting a further pickup in growth in emerging market and developing economies. From the global economic perspective the recovery continues but

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at a slow and increasingly fragile pace. The global economy is thus at cross roads experiencing uneven growth recoveries, deflationary pressures in some parts and uncertainties in some jurisdictions; in addition, geographical risks loom large.

Amidst the gloomy landscape of unusual volatility in the international economic environment, the Indian economy has emerged as a bright spot in the world economy, becoming one of the fastest growing economies in the world. The macro-economic stability has improved substantially with the continuance of fiscal prudence, lower inflation, lower Current Account deficit and robust foreign exchange reserves. The reforms that were initiated in 2014-15 for de-bottlenecking the economy by removing structural constraints have been taken forward this year. Growth is back, with its desirable concomitants of mild inflation and manageable Current Account balances with stable rupee. The growth agenda of the Government has been tethered to the revival of manufacturing unleashed in the Make in India initiative, accompanied by liberalization of foreign direct investment, a large array of investment facilitation measures and steps to improve saving. The headline WPI Inflation declined much faster than the CPI Inflation following the global trend of declining commodity prices. WPI Inflation has been in the negative territory since November 2014 and it averaged 2.8% in 2015-16 (April June), as compared to 2% in 2014-15. The WPI based core inflation declined from 2.4% in 2014-15 to 1.5% in 2015-16 (April-June).

The liquidity conditions were generally tight during the first quarter (Q1) of 2015-16 mainly due to restrained Government spending. In the second quarter (Q2) of the FY 2015-16, however, liquidity conditions eased significantly as public expenditure picked up; in the third quarter (Q3) liquidity conditions tightened due to the festive season currency demand.

The performance of the Scheduled Commercial Banks (SCBs) during the FY 2015-16 remained sub-dued due to tepid growth (below 10%) in loans and advances. The slowdown in the growth in the Balance Sheets of Banks witnessed since 2011-12 continued during 2015-16 as well. Growth in investments also slowed down marginally. The decline in credit growth reflected the slowdown in the industrial credit take off, poor growth of earning reported by the corporate sector and risk aversion on the part of Banks owing to rising NPAs. During the FY 2015-16, year-on-year (Y-O-Y) growth in gross Bank credit outstanding persisted around 10%.

The financial performance of NBFC Sector has remained unchanged for the last two years. Net Profit as a percentage to total income remained at 18.3% as on March 2015 and March 2016 and RoA stood at 2.2% during the same period.RoE (Return on Equity) has increased to 10.6% from 10.3%. While the regulatory norms for NBFC Sector are sought to be brought closer to those applicable to the SCBs, the performance of this Sector (RoE and RoA) seems to be much better as compared to that of Banks. The aggregated Balance Sheet of the NBFC Sector has expanded by 15.5% Y-O-Y basis in March 2016 as compared to 15.7% in the previous year. Loans and advances increased by 16.6%, while total borrowings increased by 15.3% in March 2016. Gross NPAs of NBFC Sector as a percentage of the total advances declined to 4.6% in March 2016 from 5.1% in September 2015. Net NPAs as a percentage of total advances also declined to 2.5% from 2.9% during the same period.

FINANCIAL PERFORMANCE OF THE NBFC SECTOR

ITEM MAR 2015 (per cent) MAR 2016 (Per cent)

1 Capital market exposure (CME) to total assets 7.40 8.5

2 Net Profit to total income 18.3 18.3

3 RoA 2.2 2.2

4 RoE 10.3 10.6

Source: RBI Supervisory Returns

In a challenging external environment, your Company has performed well and delivered another year of consistent, competitive, profitable and responsible growth with a deep understanding of consumer insights.

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Financial Snapshot: Performance High light of the year 2015-16

GrossRevenuerecorded`2,08,523 lakhs, an increase of 2.30%. ProfitafterTaxregistered`8,744 lakhs, recording an increase of 4.40%. Earningspersharefortheyearroseto`4.69 from `4.49 of last year. IncomefromLoanincreasedto 2,00,640 lakhs from 1,90,882 lakhs in the previous year, registering an increase

of 5.11%.

This onward march of the Company during the Financial Year 2015-16 on a higher growth trajectory could be made possible by the zest and dedication imbued with sense of zealousness and avidity demonstrated by its committed employees.

New Product Development

In the current scenario of NBFCs business in general and the Gold Loan business in particular, it is crucial to identify the requirements of different segments and based on the same to develop and implement new products or to make improvements in the existing products on a continuous basis. Your Company has adopted a market segmentation approach in that it targets specific customer segments in the market to address their requirements. Two such products, viz., Muthoot Special Gold Loan and Special 16 launched in the previous year to bring back those Customers who had moved to Banks, have received wide acceptance and are holding noticeable AUM now.

Your Company has devised a bouquet of Gold Loan products in FY 2015-16 with varying mix of Interest Rate Processing Fee - LTV Tenure - Repayment Frequency. Based on the market requirement your Company has launched in FY 2015-16 different Gold Loan Variants such as:

Samudra: This product was launched in the Kanyakumari district Branches, targeting the price conscious Customers when there was a wide spread campaign by the Competitors with their Low Interest Maximum LTV products. Encouraged by the success of its Kanyakumari launch, this Variant was later extended to other market segments and is holding substantial AUM now.

Dhinam: A custom-designed product meant for self-employed and business class with the special feature of Door Step Collection Facility.

Steady-16: A Gold Loan designed for high value pledge Customers with the unchanged interest rate for six months.

Choice: This is a Gold Loan to support the farmers in selected locations where agriculture is the predominant activity. This Variant offers a rebate to those who make prompt interest payment at the end of the harvest period of six months.

One Plus: This is the latest product introduced in the FY 2015-16 targeting the price conscious Customers in the market. This was introduced on specific demand from the market for a lower interest maximum LTV product.

Special 16 Redesigned: This Gold Loan Variant, initially introduced for a specific range of loan ticket size subsequently redesigned in the FY 2015-16 with an enhanced maximum loan limit has shown good response from the market which resulted in its considerable growth in AUM.

Capital Assist: Understanding the opportunities in the Online market space in the FY 2015-16 the Company has tied up with one of the most prominent online market players and introduced loan products suiting to meet the fund requirements of sellers in the Online platform. Disbursements under this product have commenced.

Your Company had ventured into the non-gold collateralized retail loan business in the FY 2015-16 with the introduction of Suvidha and SME loans, collectively known as Neighborhood Loans which have received very good response from Micro and Small segment of MSME Sector. The total disbursement under these products since launching is around `250 crores. In response to the various feedbacks from the market, a few improvements were made in the products to make them suitable to the market requirements.

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Your Company has also started mortgage loan business in the FY 2015-16 through Loan Against Property (LAP) in selected locations. The Companys constant endeavor to identify the market needs and to offer innovative solutions to the Customers will continue.

Credit to Micro and Small Sector Entrepreneurs

Persons in this Sector do not generally have collaterals to avail bank finance; adequate and timely credit at reasonable cost is, therefore, a critical problem faced by them; they do not have enough gold collateral to avail gold loan either. Your Company has, therefore, conceived two kinds of short term loans with the facility of collection of Equated Daily Instalments (EDIs) at the borrowers doorstep- viz., SME loan and Suvidha loan. These loans are for meeting their immediate Working Capital requirements or Cash requirements. I am proud to come on record that these two loans, an initiative of your Company, contribute to the national cause of Financial Inclusion and GDP growth.

SME Loans:

SME loan (Small and Medium Enterprises Loan) is a short- term loan ranging from `5,000/- to `50,000/ with a repayment tenure of 104 business days. Loan is offered against hypothecation of stock-in-trade or business assets.

Suvidha Loan

This is an unsecured short- term loan extended to the individuals engaged in Micro and Small Enterprises, either in manufacturing or in trading Sector, ranging from `5,000/- to `15,000/-with the repayment tenure of 104 business days.

Use of Technology in respect of SME and Suvidha Loans

Technology is increasingly being used in SME and Suvidha loan portfolios in drawing information about the credit history of the person and in KYC verification. Adoption of technology helps in accelerating the market coverage and thereby in adding more Customers.

IT Structure

Your Company, I am proud to place on record, has made great strides in the use of information technology by achieving quantum milestones in project completion as well as in launching new projects in an effort to drive towards quality enabled enterprise digitilisation. Integrated Loan Management System which offers unified system for major loan products of the Company, facilitating 360 degree view of the Customer, has been successfully implemented in Traders Flexi Gold Loan product and is now ready for relaunch. Key modules of the Enterprise Resource Planning solutions have been successfully implemented in the Head Office and in all branches. As part of the Integrated IT Infrastructure project, fail safe secure network connectivity to the branches has been successfully implemented. Key Servers have been moved to a state of the art Data Centre in Bangaluru with back up Servers in duel back up locations (Head Office and Ctrls Hyderabad). To ensure business continuity to committed RTO (recovery time objective) RPO (recovery project objective) disaster recovery process is being implemented.

First phase of the HRMS, an in-house soft-ware that manages the entire workforce management has been successfully implemented with biometric attendance system. Muthoot Fincorp Ltd. has been authorized by UIDAI to be the KUA (KYC User Agency) of Aadhaar which enables access to their database for KYC information. This helps in speedy KYC verification (with respect to Aadhaar database) and a faster, accurate acquisition of customer information. Our key application has also been integrated with Transunion, which enables further KYC verification of the Customer with respect to databases of CIBIL, Voters ID, PAN Card etc. This helps in improved Customer credit assessment and quicker decision making process.

In an effort to ensure quality IT service delivery, KPMG has been engaged to carry out Information System audit within Muthoot Fincorp Ltd and they are in the final stages of conducting compliance audit. The Company has engaged Gartner Inc., worlds leading information technology research and advisory Company, to be the advisory

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partner in our journey towards enterprise-wide digitilisation.

HR Initiative Defining Human Resources Development Road Map

Your Company has adopted a very pragmatic and balanced people strategy to create a composite and responsible HR culture in the Company that can drive growth and also adequately face various challenges of the current times. A comprehensive HR Strategy and Frame work has been drawn up to take care of all these challengesin an integrated manner. Your Company has taken a major step to develop next line of leaders for the future.

Organisational Development and Training

For preparing the employees for the future and to address the ever increasing needs of business growth, the Organisational Development Department of your Company is continuously engaged in training the employees, updating them with the products, processes, recent changes in the financial sector, the regulatory requirements and behavioural aspects.

The Department compulsorily conducts minimum three training programmes in a financial year for each employee, on two products and related processes and one on behavioural training.

With the firm conviction that investment in human capital is one of the most valuable assets, your Company has launched:

4 Learning Management System (E- Learning Modules)

A compulsory on-line learning module for employees at all levels, comprising daily materials, Circulars, courses on products and process and behavioural aspects.

4 Shubharambh

It is a daily learning series called Daily materials on products and processes and on topics related to their work. Everyday learning is reinforced through monthly assessment, the scores of which are renewed.

4 Continuous Business Enhancement Programmes (Refresher Training)

This is a continuous Learning Programme designed to keep the employees abreast with the changing trends and advancements in various products, processes and statutory requirements through Classroom training.

4 Soft Skills and Behavioural Training

Envisaged for the employees of the level of Branch Manager to the level of Regional Manager, Sessions were held on Motivational Management, Developing Leadership Skills, Role transition and Management Skills.

Branch Internal Audit:

During the year under review, your Company has introduced a new Internal Audit Software to automate the Branch Audit Reporting. Whilst the audit is conducted in the conventional manner, the Internal Auditor sitting at the Branch by verifying the relevant records prepares the Audit Report and uploads it on to the MIAS package. The Branch Manager who rectifies the irregularities and the lapses observed in the Report has to inform the action taken by updating the MIAS package. The Audit Report can be viewed by the Branch Manager, Area Manager, Regional Manager, State Head, Manager - Audit, Regional Manager- Audit, Operations Heads and the Risk Team at the Head Office. I am quite happy to place on record that MIAS has stabilized and is functioning well.

Customer Contact Centre

With the objective of providing an outstanding Customer Service Experience, your Company has opened two Customer Contact Centres one in Bangalore and another in Delhi. These Centres give the Customers detailed information on the Companys Products and Services and also answer their queries or address their concerns quickly

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through chat or e- mail or telephone call; they also take feedback from the Customers about their experiences in their dealings with the Company as well as their financial needs. These Customer Contact Centres are playing a critical role for the Company in retaining existing Customers and in acquiring new Customers.

Grievances Redressal Mechanism

Your Company, I am proud to say, has put in place a robust and transparent Grievance Redressal Mechanism in accordance with the Regulatory guidelines. The person with whom the Customer can register his complaint and the different levels of escalation and the timelines for satisfactory solution are displayed in all Branches in respective vernacular languages. The provision for registering the Complaint is also enabled in the website of the Company; there is also facility for registering Complaints through the Call Centres. I am quite proud to come on record that every Complaint received is attended to and replied within the committed timeliness and to the extent possible resolved to the satisfaction of the Customer; where the Complaints received pertain to the Products and business processes, amendments, if required are effected without delay.

Corporate Governance

Your Company is committed to sound Corporate Governance practices, grounded on the bed rock of highest level of accountability, transparency and integrity in all spheres of its operation and in all its dealings with stake holders - viz. the Shareholders, Employees, Customers and Bankers - and high ethical standards in the conduct of business. The Company is firm in its commitment in promoting best Corporate Governance practices and strives to live up to Shareholders expectations. The thrust of the Corporate Governance of the Company is to enhance shareholder value and enhancing as also maintaining the wealth of the Company by pursuing ethical practices in the conduct of its business and maintaining high standards of disclosure and transparency.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Being the CSR arm of the Company, Muthoot Pappachan Foundation (MPF) supports the planning, facilitation and implementation of the CSR initiatives of Muthoot Fincorp Ltd. During the FY 2015-16 your Company had undertaken the following key CSR activities:

TheflagshipCSRprogrammeoftheCompany,viz.,SmilePlease,isamissionprovidingfreelifechangingcleftcare and surgeries to children and youngsters with congenital cleft issues commenced in last year partnering with Mission Smile, a Medical Charitable Trust. During the year under review surgeries were conducted in the South Indian States Kerala, Andhra Pradesh and Pondichery. This year 377 children had received free cleft surgery and care and the total number of patients received surgery through this programme is 676 as of now.

Muthoot Life BloodDirectory initiated in 2011-12 has now a strength of 64,416 registeredDonors spreadacross the Country. 1026 patients were supported with blood donations as of now, adding on to the Countrys voluntary blood pool.

AashianainMulanthuruthyhascompleteditsconstructionandtheCentreforPhysicalMedicineandRehabilitation(PMR) is expected to start functioning from the Financial Year 2016-17.

TreatmentSupportswereprovidedto92patientsfromdisadvantagedsectionsofthesociety.Supportsweregiven to patients suffering from cardiac issues, kidney ailments, cancer and also other chronic diseases.

FreeKneereplacementsurgeriesweregivento3patientsthroughMuthootLifeBrigadeHospital.

PeriodicMedicalCampswereconductedatthebranchesoftheCompanyatvariouslocations.

Education Educationsupportwasextendedto19studentssupportingthemtocontinuetheirprofessionaleducation.

NotebooksweredistributedtostudentsfromdeservingbackgroundsacrossKeralaaspartofthePravesanolsavam in June 2015.

ASmart Class was donated to Govt. Lower Primary School, Thiruvallam in Trivandrum. This school is functioning in the fishermen area in Trivandrum.

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Livelihood

MPF in partnership with renowned NGO Aide et Action collaborating with their iLEAD project started aVocational Training Center in Kerala. First MPF iLEAD Center at Trivandrum started this year offering the course in Hospitality trade. Seats are offered to candidates from deserving backgrounds enabling them to pursue the course free of cost and then find a livelihood.

ErnakulamCricketClub isbeingcontinuously supported inprovidingprofessional coaching inCricket to thebudding talents and also in providing them opportunities to play in professional matches. Special attention is given to include aspiring players from challenging backgrounds.

Housingassistancewasgiventoawidowfromfinanciallypoorbackground. During the FY 2015-16 your Company had spent ` 1.88 Cr for CSR activities.

Bringing succor to the poor and the needy

Going beyond the frontiers of financial services and committing itself to discharging its obligations to the society at large, your Company continues to fund the various philanthropic activities undertaken by Muthoot Pappachan Foundation promoted by Muthoot Pappachan Group.

Contributing to greener tomorrow:

Committed to the greening of the Nation, your Company continued to focus on Wind Power Generation staying invested ` 118.51 crores with a total Wind Power Generation Capacity of 23.225 MWs from 19 Turbine Generators contributing 0.33% of the gross income of the Company.

Seamless Customer Care

With genuine concern for Customers deeply ingrained in its value system and sensibility to their fast changing needs at the core of all its business activities, your Company continued its seamless service to the Customers, further cementing the relationship built over a century on the bed rock of trust. The Company is highly responsive to the needs and satisfaction of its customers and is committed to the belief that all technology, processes, products and skill of its people must be leveraged for delivering to the Customers the best of services and superior experience mirroring tradition of excellence and quality products creating highest level of customer delight.

Gratitude to our Board of Directors

Our Board of Directors has all along been doing a central role in the Corporate Governance of the Company in which task it has been acting honestly, in good faith and in the best interests of the Company and its shareholders. I place on record my sincere gratitude particularly to the Independent Directors for their continued support and guidance.

Looking forward

The global macro - economic land mark is currently chartering a rough and uncertain terrain characterized by weak growth of world output. The situation has been exacerbated by the declining prices of crude oil and other commodities, turbulent financial markets and volatile exchange rates. The year 2015 posed several challenges to the global economy with uncertainty pervading various fronts which metamorphosed into subdued economic activity. The economy had an inopportune encounter with the FY 2015-16 as it had to surmount a renewed episode of global asset market volatility, receding momentum in the advanced economies and continuing headwinds for emerging market economies and lower income Countries, in addition to several stresses of non- economic origin threatened economic activities.

Amidst such a gloomy and bleak international economic landscape of unusual volatility, India stands out as a haven of macro- economic stability, resilience and optimism and an outpost of opportunity (as said by Finance Minister). The Indian economy has continued to exhibit resilience and has shown a GDP growth rate of 7.6% for the FY 2015-16 from 7.2% in 2014-15. The steps taken by the Government of India have shown positive results as

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3.74

4.415

5.41 5.615.69

5.264.83

5.475.76 5.77

6.07

India Inflation Rate

Source: Ministry of Statistics and Programme Implementation (MOSPI), India

Indias GDP at factor cost at prices of 2015-16 is ` 113.5 trillion (US $ 1.668 million) as against ` 105.5 trillion, (US $ 1.55 million) in 2014-15, registering a growth rate of 7.6%. The Economic Survey 2015-16 has forecasted that the Indian Economy will grow by more than 7% for the third successive year 2016-17 and can start growing at 8% or more in next 2 years. According to IMF World Economic Outlook Update (January 2016) and the United Nations World Economic Situation and Prospects, India is expected to grow at 7.76% in 2016 despite the uncertainties in the global market.

The year 2016 has brought inflation under control. The CPI New Series Inflation has been around 5.5% and the WPI has been negative as a result of fall in international oil and other commodity prices. The outlook for inflation is, however, conditional on international prices and the state of domestic demand. Oil price is likely to remain depressed; Commodity prices too will remain quiescent. Governments various initiatives such as MAKE IN INDIA, START UP INDIAand DIGITAL INDIA are expected to boost demand in the economy. Another key focus of the Government of India is to revive the rural economy which has not shown a major growth owing to severe drought across the Country and the spatial rainfall. Given the positive indication of normal monsoon across the Country, growth in agriculture is expected which would boost the economy and also create more rural demand. The year thus far has witnessed macro-economic stability aided by favourable factors such as comforting inflation indicators, benign fiscal situation and improving external current account balance. All these factors have helped India emerging as the fastest growing economy among the large economies. The Indian economy is worlds 10th largest by GDP and the 3rd largest by Purchasing Power Parity (PPP); it is also adjudged as the 5th best Country in the world for dynamic growing business. In a differentiated global economic backdrop in the FY 2015-16 the Indian economy posted improvement in its growth-inflation dynamics. Spurred by the positive change in sentiment associated with the Governments pushing reforms with gradual incrementation, the economic growth of India is poised to accelerate and as predicted by most International Organisations Indias economic growth will surpass China in 2016-17. Indias financial system remains stable and the relatively stronger macro-economic fundamentals lent resilience to face the still pervading uncertainty and emerging risks in the global economy and financial markets.

Consumer prices in India went up 6.07% year-on-year in July 2016, accelerating for the 4th straight month and reached the highest since August 2014; figures beat market expectations of 5.9% driven by food cost. On a monthly basis, consumer prices rose 0.77%.

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In India the most important category in the consumer price index is Food and Beverages (45.86% of total weight), Housing accounts for 10%, Transport and Communication for 8.6%, Fuel and Light for 6.84%, Clothing and Foot-wear for 6.5%, Medical Cure for 5.9% and Education for 4.5%.

= The average retail inflation measured by Consumer Price Index (CPI) in 2015-16(April-December) is seen at 4.5-5%.

= Average Wholesale Price Index (WPI) inflation in 2015-16 (April-December) is seen at 3% from 2.33% in 2014-15.

Your Company aspires and strives for consistent growth with improvement in profitability and focusing on core areas like retail lending, improving asset quality and non-interest income. On the qualitative side, the Companys endeavor in Capacity Building, Technology Upgradation, Talent Management & Training and Marketing & Sales will continue with full vigour. The Company is continuously evolving its Strategy Focus to cope with changing circumstances by consolidating its core competencies while striding ahead by adapting its business model in sync with the changing economic and external business environment.

Your Company has embarked on its journey into the year 2016-17 with the resolve and confidence to achieve further excellence in service delivery and in financial performance in meeting which I look forward to your continued support and encouragement as always.

Sd/-Thomas John Muthoot

Chairman and Managing Director

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The year under review was a remarkable turnaroundfor the Microfinance Division of Muthoot Fincorp Ltd.We started hiving off the microfinance business under a separate umbrella Company named Muthoot Microfin Ltd., giving the microfinance operations unlimited opportunities to grow and expand exponentially. The transition was not easy; we faced a few unprecedented challenges to keep up with the pace of growth the microfinance operations had been enjoying during the past five years. However, once again the results amazed me when the very first year of operations of the new Company closed with a net profit of `9.41 crore (PAT) and a total disbursement of `765.07 crore as on 31st March 2016.

Following the strategic decision to hive off microfinance operations from Muthoot Fincorp Ltd, the newly NBFC-MFI licensed Muthoot Microfin Ltd. initiated its operations in Kerala, Tamil Nadu and Karnataka in the fiscal year 2015-16. Muthoot Microfins Operational Income was `52.15 crore for the FY ended March 31, 2016.

Meanwhile, the microfinance portfolio under Muthoot Fincorp Ltd. expanded its operations in North Indian States in the Financial Year 2015-16. Cumulatively, the microfinance operations under both Muthoot Fincorp Ltd. and Muthoot Microfin Ltd. have served more than 2.3 million women entrepreneurs and enjoy above 1.23 million active clients as on 31st March 2016.

During the FY 2015-16, we were focused on strengthening the risk and audit framework of microfinance operations. We ensured that all our services are received by the well-deserved and underserved bottom of the pyramid communities. And put into practice cent percent transparency in the processes and policies.

The unique products we tailored for our microfinance clients including Dairy Loans, Sanitation Loans and Solar Lantern products made huge impact in the community. Our IGL Dairy loan has benefitted about 90,000 dairy farmers with an active clientele of 62,446

Message from the Executive Director

Mr. Thomas Muthoot

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farmers as on 31st March, 2016. As a beginning and in tune with the Governments Swachh Bharat initiative, we financed for installing 29 precast toilets in Koppal and Gadag districts of Karnataka. And distributed 1,76,344 solar lanterns in the Financial Year under review, all together lighting up 1,99,966 rural households with our solar lantern products.

Muthoot Microfin Ltd., a Subsidiary of Muthoot Fincorp Ltd. is expected to reap significant results in the coming years. We identified immense possibilities for the microfinance sector in future and hence had decided to hive off the business under a separate umbrella Company. An umbrella Company will give microfinance operations unlimited opportunity and flexibility to work in the community while serving and accomplishing Muthoot Pappachan Groups social and business goals.

I would like to bring to your notice that the slowdown in microfinance portfolio under Muthoot Fincorp Ltd is the result of this hiving off strategy. In the long term, the Subsidiary (Muthoot Microfin Ltd.) will bring immense value addition in terms of Value of Investment and in consolidated figures to Muthoot Fincorp Ltd.

The positive regulatory atmosphere and business friendly approach by the Central Government are creating a vast platform for doing business in this Country. The recent SFB approvals prove that the Reserve Bank of India has set high expectations from Microfinance Institutions in accomplishing the greater goal of financial inclusion of majority population in India. The MUDRA Infrastructure will also lead to lower cost of fund for the Microfinance Companies.

Your Company has set a clear cut trajectory to meet our business and social goals. We are on the right path and we believe that with our highly efficient management and human resources we are moving ahead in the right direction.

sd/-Thomas MuthootExecutive Director

25

NOTICE TO MEMBERSNotice is hereby given that the Nineteenth Annual General Meeting of Muthoot Fincorp Limited will be held at 10.00 a.m on Friday, the 30th of September 2016 at the Registered Office of the Company at Muthoot Centre, Punnen Road, Trivandrum 695 039, to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Audited Balance Sheet as at 31st March 2016 and the Statement of Profit and Loss for the year ended on that date together with the Reports of the Directors and Auditors thereon.

2. To appoint a Director in place of Mr. Thomas George Muthoot, (DIN: 00011552) Director of the Company retiring by rotation and being eligible, offers himself for re-appointment.

3. To ratify the appointment of Auditors to hold office from the conclusion of the Nineteenth Annual General Meeting to the conclusion of the Twentieth Annual General Meeting.

SPECIAL BUSINESS:

1. Issue of Non-convertible Debentures (NCDs) on Private Placement Basis

To consider, and if thought fit, to pass with or without modifications, the following resolution as a special resolution.

RESOLVED THAT in accordance with all applicable laws including the Companies Act, 2013, as amended and the rules thereunder including but not limited to the Companies (Prospectus and Allotment of Securities) Rules, 2014, as amended, the Memorandum and Articles of Association of the Company, and subject to any other requirements of or terms laid down by the Reserve Bank of India, and/or any other concerned regulatory authority, as may be necessary, and all other appropriate statutory and governmental authorities and departments, the Company be and is hereby authorised to create, offer, issue and allot secured/unsecured redeemable non-convertible debentures in the aggregate amount of up to `250 Crores (Rupees Two Hundred and Fifty Crores only), in one or more tranches on Private Placement including institutional placements during 2016-17 (the Debentures on Private Placement), to eligible investors during the financial year 2016-2017.

NOTES:

1. A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of himself and the proxy need not be a Member of the Company. Proxies, in order to be valid, must be duly filled in, signed and deposited at the Registered Office of the Company at least 48 hours before the commencement of the Meeting. A form of proxy is enclosed.

2. Statement pursuant to Section 102(1) of the Companies Act, 2013, in respect of Special Business in the Notice is annexed hereto.

3. The Annual General Meeting is called at a shorter notice, and hence the enclosed form may be filled and returned giving your consent for calling the Annual General Meeting at shorter notice under Section 101(1) of the Companies Act, 2013.

4. The Map showing the route to reach the venue of the meeting is also enclosed.

By Order of the Board

sd/-T.D. Mathai

Company Secretary

Trivandrum27.09.2016

26

STATEMENT PURSUANT TO SECTION 102 (1) OF THE COMPANIES ACT, 2013

Item No. 1

Issue of Non-convertible Debentures (NCDs) on Private Placement Basis

The Company can issue NCDs on private placement as permitted by the RBI Circular No: DNBR (PD) CC No.021/03.10.001/2014-15 dated 20th February 2015 read with section 42 of the Companies Act 2013 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules 2014.

As per Section 42 of the Companies Act, 2013 for issue of NCDs on private placement previous approval of Shareholders by a special resolution is required and it shall be sufficient if the Company passes a previous special resolution only once in a year for all the offers or invitations of such NCDs during the year.

The Company proposes to issue secured/unsecured NCDs on private placement basis aggregating to ` 250 Crs in one or more tranches including institutional placements during 2016-17.

Hence approval of the members by way of special resolution is required.

None of the Directors, Key Managerial Personnel (KMP) and their relatives are concerned or interested, financially or otherwise in the proposed resolution except for the investments of Mr. Thomas John Muthoot, Managing Director and Mrs. Preethi John Muthoot, his wife, Mr. Thomas Muthoot, Executive Director & Chief Financial Officer and Mrs. Remmy Thomas, his wife, Mr. Thomas George Muthoot, Director and Mrs. Nina George his wife and Mrs. Janamma Thomas, Director in the paid up share capital of the Company.

All documents / papers relating to the above resolutions are available for perusal at the Registered Office of the Company on any working day during working hours up to the date and time for commencement of the Annual General Meeting.

By Order of the Board

sd/-T.D. Mathai

Company SecretaryTrivandrum27.09.2016

27

DIRECTORS REPORTTo, The MembersMuthoot Fincorp Limited

Your Directors are pleased to present the Nineteenth Annual Report together with the audited accounts of the Company for the year ended 31st March, 2016.

FINANCIAL RESULTS (` in Lakhs)Standalone Consolidated

ParticularsCurrent

year ended 31.03.2016

Previous year ended 31.03.2015

Current year ended 31.03.2016

Previous year ended

31.03.2015

Gross Income 2,08,522.88 2,03,886.52 2,19,242.60 2,08,236.99

Less Expenses 1,94,807.87 1,90,521.02 2,04,584.25 1,95,214.68

Profit before Tax 13,715.01 13,365.50 14,658.35 13,022.31

Less Tax Expenses 4,970.84 4,988.41 5,340.75 4,979.71

Profit for the period 8,744.17 8,377.09 9,317.60 8,042.60

Balance Profit carried to Balance Sheet 44,463.39 43,966.47 43,483.95 42,845.54

Earnings Per Share (`) 4.69 4.49 4.86 4.25

Reserves & Surplus 1,23,450.24 1,14,706.06 1,22,685.22 1,13,611.35

Fixed Assets (Net) 51,147.83 55,080.36 52,605.57 56,177.25

Borrowings 9,25,106.28 8,73,654. 45 10,03,170.86 9,06,268.12

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SHARE CAPITAL & NET WORTHThe Authorised and Paid up Share Capital of the Company stood at 20,000 lakhs and 18,656.27 lakhs respectively. The Net Worth of the Company is 1,42,106.51 lakhs as against 1,33,362.33 lakhs in the previous year, registering an increase of 6.56%.

DIVIDENDYour Directors are not recommending any dividend during the year under review.

THE AMOUNT IF ANY PROPOSED BY THE BOARD TO CARRY TO RESERVEDuring the year, the Company proposes to transfer the following amounts to Reserves:

1. Statutory Reserve - `1,748.84 lakhs2. Debenture Redemption Reserve - `6,498.42 lakhs

-100

9900

19900

29900

39900

49900

59900

69900

79900

89900

99900

109900

119900

129900

139900

149900

2007-'08 2008-'09 2009-'10 2010-'11 2011-'12 2012-'13 2013-'14 2014-'15 2015-'16

Share Capital Networth

` in Lakhs

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OPERATIONSAs on 31 March 2016, your Company had 3,645 Branches spread across 17 States as detailed below and serving about 83,000 customers a day on an average.

Sl. No: State No: of Branches

1 Kerala 959

2 Tamil Nadu 895

3 Karnataka 535

4 Andhra Pradesh 339

5 Maharashtra 186

6 Goa 11

7 Gujarat 117

8 Rajasthan 52

9 Punjab 49

10 Madhya Pradesh 31

11 Uttar Pradesh 43

12 Odisha 11

13 Haryana 60

14 Delhi 95

15 Uttarakhand 2

16 Telengana 233

17 West Bengal 27

Total 3645

The long standing association of our employees with our customers, their experience, our expertise in the core product i.e. gold loan, and our presence especially in areas with poor banking coverage is helping the Company in providing quick and customised finance options and investment products to our customers.

The total income during the year was ` 2,08,522.88 lakhs from operations and Profit After Tax was ` 8,744.17 lakhs. The total Asset under Management (AuM) was ` 8,90,743.61 lakhs. Your Company continued its focus in introducing innovative products to suit the diverse requirements of the Customers.

Over the past few years, the increase in branch network, the consequent intake of branch staff for manning these branches and the introduction of new products, has brought with it fresh challenges, particularly those pertaining to its operations. Improving the operational controls is a continuous process and the company is giving its undivided attention to make it robust and tuned to the requirements.

Some of the key initiatives taken to improve the sales of the company are:

Re-organisation of structure We have divided the entire area of our operation into six zones with 60 regions. Each region is headed by Regional Manager (RM). Area Managers are allotted to each RM for looking after Operations, Business Development, Infrastructure, Admin and Human Resources. On an average, there are 55 branches in a region. This re-organisation has helped to build conviction and confidence among staff and increased focus on the core product viz. Gold Loan.

More focus to increase walk-in of customers, particularly new customers.

Introduction of new competitive products to gain momentum of gold loan business.

Introduction of Neighborhood Loans (SME & Suvidha) to serve the small entrepreneurs to increase the customer loyalty and walk-ins.

Introduction of Business loan to cater to services, business, trade, manufacturing activities etc.

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Tied up with Unique Identification Authority of India (UIDAI) for better KYC compliance through e-KYC.

Enhancement of the technology to view the daily MIS.

Due focus on collection of interest on loan.

Introduction of online Branch Inspection Reports.

Introduction of Branch Performance Score Card system.

COMPLIANCE WITH RBI GUIDELINESYour Directors confirm that the Company has not invited or accepted any deposits from the public and the Company has complied with all the applicable regulations of the Reserve Bank of India as on March 31, 2016.

CORPORATE GOVERNANCEYour Company upholds the standards of governance and is compliant with the Corporate Governance provisions as stipulated by RBI in both letter and spirit. The Companys core values of honesty and transparency have since its inception been followed in every line of decision making. Setting the tone at the top, your Directors cumulatively at the Board level, advocate good governance standards. Your Company has been built on a strong foundation of good corporate governance which is now a standard for all operations across your Company.

The Company had framed the Corporate Governance Policy and was approved by the Board at their meeting held on 20th February, 2009.

Board of DirectorsYour company recognises and embraces the importance of a diverse board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill, regional and business experience, and cultural and geographical background which will help in maintaining our competitive advantage. Your Board has an appropriate mix of executive and independent directors to maintain the independence of the Board and separate its functions of governance and management. Your Board of Directors comprises of individuals who have vast business experience in various disciplines. The day to day affairs of the Company is managed by a Senior Management Team lead by the Managing Director, who functions under the overall supervision, direction and control of the Board of Directors.

The Board of your Company comprises of seven Directors as on the date of this report as detailed below:

Category Name of Directors

Executive DirectorsMr. Thomas John Muthoot, Managing Director

Mr. Thomas Muthoot, Executive Director & Chief Financial Officer

Non - Executive Non Independent Directors

Mr. Thomas George Muthoot

Mrs. Janamma Thomas

Non - Executive Independent Directors

Mr. R. Kamalasanan Nair

Mr. A.P. Kurian

Mr. A. Vikraman

All the Directors have rich experience and specialized knowledge in various areas of relevance to the Company. The Board of Directors consists of members appointed as per the provisions of the Companies Act, 2013.

Mr. Thomas George Muthoot (DIN: 00011552) Director of the Company will retire at the ensuing Annual General

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Meeting and being eligible, offers himself for reappointment. The Board of Directors recommends the reappointment of Mr. Thomas George Muthoot as Director of the Company.

A) Changes in Directors and Key Managerial Personnel during the year 2015 -16

There was no change among the Board of Directors during the year under report. Mr. Thomas John Muthoot and Mr. Thomas Muthoot were reappointed as Managing Director and Executive Director respectively for a further term of 3 years with effect from 1st February, 2016. There was also no change among the Key Managerial Personnel during the year under report.

The following persons are the Key Managerial Personnel of the Company:

1. Mr. Thomas John Muthoot - Managing Director2. Mr. Thomas Muthoot - Executive Director cum Chief Financial Officer3. Mr. T.D Mathai - Company Secretary

B) Woman Director

As per the provisions of Section 149 of the Companies Act, 2013, the Company shall have at least one woman Director in the Board. Your Company has Mrs. Janamma Thomas, as Woman Director on the Board.

C) Declaration by Independent Director(s) and re- appointment, if any

The Company has three Independent Directors in the Board. The Company has received necessary declaration from each Independent Director under Section 149 (7) of the Companies Act, 2013 to the effect that he meets the criteria of independence as laid down in Section 149 (6) thereof.

Disclosure relating to remuneration of Directors and Key Managerial Personnel.In accordance with Section 178 and other applicable provisions, if any, of the Companies Act, 2013 read with rules issued there under, the Board of Directors at their meeting held on 27th March 2015 formulated the Nomination and Remuneration Policy of your Company on the recommendation of the Nomination and Remuneration Committee. The Nomination and Remuneration Policy covering the Companys policy on appointment and remuneration of Directors, Key Managerial Persons and other employees including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section (3) of section 178 of the Companies Act, 2013 is annexed to this report as Annexure I

The Managing Director of your company does not receive remuneration from any of the subsidiaries of your company.

The information required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including any amendments thereof in respect of Directors/employees of your company is given in Annexure II to this report.

We affirm that the remuneration paid to the Directors is as per the terms laid down in the Nomination and Remuneration Policy of the Company.

Number of meetings of the Board of Directors

12 meetings of the Board of Directors were held during the Financial Year 2015-16 on the following dates: 1st April 2015, 1st June 2015, 30th June 2015, 15th July 2015, 31st July 2015, 12th October 2015, 30th October 2015, 11th November 2015, 5th December 2015, 15th January 2016, 15th February 2016, and 29th March 2016. The maximum interval between any two meetings did not exceed 120 days, as prescribed by the Companies Act, 2013.The Composition of the Board of Directors and Category of Directors during the financial year under report and the

32

number of Directorships of each Director are given below.

Name of the Director Nature of DirectorshipNo. of

meetings attended

No: of other Directorship etc (As per last declaration made

to the Company)

Public Pvt. Firms/ LLPs

Mr. Thomas John Muthoot Promoter andManaging Director 11 5 13 14

Mr. Thomas MuthootPromoterExecutive Director & Chief Financial Officer

11 4 14 14

Mr. Thomas George Muthoot PromoterDirector 12 5 12 14

Ms. Janamma Thomas PromoterDirector 3 0 0 3

Mr. R. Kamalasanan Nair Independent Director* 12 2 0 0

Mr. A.P Kurian Independent Director* 8 3 1 0

Mr. Vikraman Ampalakkat Independent Director* 6 1 1 0

* The Independent Directors do not hold any equity shares in the Company or in any of its group Companies.

The Board is ultimately responsible for the stewardship of the Company and to this end meets regularly to discuss, review and appraise the strategic performance of the Company including the achievement of its strategy; make sure that procedural and compliance matters are properly dealt with; monitor financial performance; provide directions on policy formulation; articulate the risk appetite and review the overall control framework. The Board thus closely monitors the overall functioning of the Company with a view to enhancing the shareholder value and ensuring adherence to the principles of Corporate Governance that it has laid down.

Committees of the Board of Directors

The Board also has delegated some of its powers to the Committees of the Board. These committees monitor matters that come under their mandate, in more detail. These committees are:

i. Audit Committee

The Company has constituted a qualified Audit Committee as required under Section 177 of the Companies Act, 2013 and Para 9A of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 . As per Sec 177(4) of the Companies Act 2013 the terms of reference to be specified in writing by the Board shall inter alia include:

i. The recommendation for appointment, remuneration and terms of appointment of Auditors of the Company.ii. Review and monitor the Auditors independence and performance, and effectiveness of Audit process.iii. Examination of the financial statement and the Auditors Report thereon.iv. Approval or any subsequent modification of transaction of the Company with related parties.v. Scrutiny of inter-corporate loans and investments.vi. Valuation of undertakings or assets of the Company wherever it is necessary.vii. Evaluation of internal financial controls and risk management systemsviii. Monitoring the end use of funds raised through public offers and related matters.

The main responsibilities of the Audit Committee are:

1. Review of the financial statements (including interim financial statements) and oversight of the financial reporting process with a view to ensuring transparency and accuracy of financial reporting and disclosures, prior to their submission to the Board for approval.

2. Review of the scope of work of the Auditor, prior to commencement of the audit and, holding appropriate

33

discussions on the matters that arose during the audit.3. Review of the robustness and effectiveness of the internal control systems in place at the Company.4. Recommending to the Board the appointment, reappointment, and if required, the replacement or removal of

the Statutory Auditors and the fixation of audit fee;5. Reviewing the effectiveness of internal audit including the independence of the internal audit function, the

adequacy of staffing and, the coverage, scope and frequency of audits;6. Review the functioning of whistle blower mechanism.

The Audit Committee is comprised of:

Name of the Director Nature of the Directorship Designation No: of Meetings attended

R. Kamalasanan Nair Independent Chairman 7

Mr. A.P Kurian Independent Director 6

Thomas George Muthoot Non-Independent Director 7

Seven meeting of the Audit Committee were held on 1st June 2015, 30th June 2015, 12th October 2015, 11th November 2015, 5th December 2015, 15th January 2016 and 29th March 2016 during the Financial Year 2015-16.

ii. Nomination and Remuneration Committee

As per the provisions of Sec.178 of the Companies Act, 2013 and the RBI guidelines, the Company has constituted the Nomination and Remuneration Committee (NRC) with the following members:

Name of the Director Nature of the Directorship Designation No: of Meetings attended

Mr. Thomas George Muthoot Director Chairman 3

Mr. Thomas John MuthootManaging Director(till 15th February 2016)

Member 2

Mr. R. Kamalasanan Nair Independent Director Member 3

Mr. A.Vikraman Independent Director Member 2

Three Meetings of the Nomination and Remuneration Committee were held on 31st July 2015, 15th January 2016, and 29th March 2016 during the financial year 2015-16.

The Board of Directors of the Company reconstituted the Nomination and Remuneration Committee on 15th

February 2016 with the following members.

Name of the Director Nature of the Directorship Designation in the Committee

Mr. Thomas George Muthoot Director Chairman

Mr. A.Vikraman Independent Member

Mr. R. Kamalasanan Nair Independent Member

iii. Corporate Social Responsibility Committee

As per the provisions of Sec 135 of the Companies Act, 2013, the Company has constituted the Corporate Social Responsibility (CSR) Committee of the Board.

The Corporate Social Responsibility (CSR) Committee is comprised of:

34

Name of the Director Nature of the Directorship Designation in the CommitteeNo: of Meetings

attended

Mr. R. Kamalasanan Nair Independent Director Chairman 2

Mr. Thomas John Muthoot Managing Director Member 2

Mr. Thomas Muthoot Executive Director Member 2

Mr. Thomas George Muthoot Director Member 2

Two meetings of the Corporate Social Responsibility Committee were held on 1st June 2015 and 11th

November 2015 during the Financial Year 2015-16.

iv. Stake Holders Relationship Committee

As per the provisions of Sec. 178 (5) of the Companies Act, 2013, the Company has constituted the Stake Holders Relationship Committee consisting of the following members:

Name of the Director Nature of the Directorship Designation in the CommitteeNo: of Meetings

attended

Mr. Thomas George Muthoot Director Chairman 7

Mr. George LamannilExecutive Director & General Counsel

Member 14

Mr. S. Kannan Executive Vice President Member 15

Seventeen meetings of the Stake Holders Relationship Committee were held on 8th April 2015, 5th May 2015, 21st May 2015, 15th June 2015, 27th June 2015, 30th July 2015, 26th August 2015, 16th September 2015, 5th October 2015, 15th October 2015, 9th November 2015, 26th November 2015, 21st December 2015, 19th January 2016, 16th February 2016, 9th March 2016 and 29th March 2016 during the Financial Year 2015-16.

Other Committees

In compliance with the Reserve Bank of India Circular dated 27 June, 2001 and 8 May, 2007, the Company has also constituted the following Committees.

i. Asset Liability Management Committee (ALCO)

The Company has constituted an Asset Liability Management Committee as per RBI Circular No: DNBS (PD). CC No. 15/02.01/2000 2001 dated June 27, 2001.

The responsibilities of the ALCO are:

a. Balance sheet planning from a risk - return perspective including the strategic management of interest rate and liquidity risks.

b. To identify balance sheet management issues like balance sheet gaps and review the liquidity contingency plan.

c. Pricing of products. d. Review the results of and progress in implementation of the decisions made in the previous meetings. e. Articulate the current interest rate view and base its decisions for future business strategy on this view. f. Capital requirement forecasts, capital allocation and monitoring of capital adequacy requirements.

35

The members of the Committee are given below:

Name of the Members Designation of the Members

Mr. Thomas John Muthoot Managing Director and Chairman of the Committee

Mr. George Lamannil Executive Director and General Counsel

Mr. S. Kannan Executive Vice President

Mr. Joseph Oommen Vice President-Finance and Accounts

Mr. Nadanasabapathy R Vice President- Resource Planning

ii. Risk Management Committee

The Company has constituted a Risk Management Committee as per the RBI Circular No: DNBS (PD) CC No. 156/03.10.2001/2009 10 dated July 1, 2009.

The responsibilities of the Risk Management Committee are:

a. Assisting the Board in the articulation of its risk appetite.b. Overseeing the implementation and maintenance of a sound system of risk management framework which

identifies, assess, manages and monitors risk;c. Recommend to the Board, clear standards of ethical behavior required of Directors and employees and to

encourage observance of these standards.d. Assessment of the Companys risk profile and key areas of risk in particular.e. Examining and determining the sufficiency of the Companys internal processes for reporting on and

managing key risk areas.

The members of the Committee are given below:

Name of the Director Nature of the Directorship Designation in the Committee

Mr. R. Kamalasanan Nair Independent Director Chairman

Mr. Thomas John Muthoot Managing Director Member

Mr. Thomas Muthoot Executive Director Member

Significant and Material Orders Passed by the Regulators or Courts

There are no significant and material orders passed by the Regulators or Courts that would impact the going concern status of the Company and its future operations.

Frauds reported to the Audit Committee by Auditors

There was no reporting of frauds by Auditors under Sub Rule (3) of the Companies (Audit and Auditors) Rules 2014.

Disclosures

Related Party Transactions

Particulars of contracts or arrangements with related parties referred to in subsection 1 of section 188 of the Companies Act, 2013 in the prescribed form (AOC-2) is given as Annexure III

Vigil Mechanism/ Whistle blowing Policy

The Company is committed to the highest standards of openness, probity and accountability. In line with that commitment, we expect employees and others that we deal with, and who have serious concerns about any aspect of the Company, to come forward and voice those concerns.

36

For this purpose, the Company has put in place a formal whistle blowing policy/vigil mechanism for its employees, customers and other stakeholders. The policy has clearly laid down its scope and applicability, procedure to be followed for whistle blowing including the e-mail address and telephone numbers of the senior officers handling the matters escalated to them through the whistle blowing mechanism. The policy is also evangelised to employees by senior officers during their visits to branches.

The Policy provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Policy is available on our website www.muthootfincorp.com.

Fair Practices Code

The Company has framed a Fair Practices Code (FPC) as per the guidelines issued by Reserve Bank of India in this regard. The FPC is also reviewed at frequent intervals to ensure its adequacy and appropriateness. The FPC is available on our website www.muthootfincorp.com

Customer Grievance

The Company has a dedicated Customer Grievance Cell for receiving and handling customer complaints and ensuring that the customers are treated fairly and without bias at all times. All issues raised by customers are dealt with courtesy and resolved expeditiously.

PERPETUAL DEBT INSTRUMENTS (PDIs)During the year under report your Company did not issue any PDIs. The amount outstanding at the close of the Financial Year under PDIs was ` 14,400 Lakhs. Interest on PDIs has been paid as per RBI guidelines.

CAPITAL ADEQUACY RATIOEvery Non Deposit taking NBFC is required to maintain a minimum Capital Adequacy Ratio consisting of Tier I and Tier II Capital which shall not be less than 15% of its aggregate risk weighted assets on Balance Sheet items and of risk adjusted value of off Balance Sheet items. For Gold Loan Companies the minimum Tier I Capital shall be 12%. The Companys Capital Adequacy Ratio was 21.00% as on March 31, 2016, consisting of Tier I Capital of 13.79% and Tier II Capital of 7.21% which is above the statutory requirement.

DETAILS OF AUCTION CONDUCTED DURING THE YEAR

The details of the auction conducted during the year under report is given below:

Number of Accounts auctioned 3,15,735

Outstanding Amount (` Lakhs)

Principal 93,582.56

Interest 36,122.49

1,29,705.05

Value fetched under auction 1,20,776.11

None of the sister concerns of the Company participated in the Auction.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT UNDER SECTION 186.The Company has not made investments not permitted under sub section (1) of section 186 of the Companies Act,2013.The other provisions of section 186 of the Companies Act ,2013 are not applicable to the Company since it is a Non-Banking Finance Company, as per the provisions of Companies (Meeting of board and its powers)Rules 2014.

37

REPORT ON THE HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES.Pursuant to Sec.129 (3) of the Companies Act, 2013 the consolidated financial statement of the Company and its Subsidiaries, prepared according to the relevant Accounting Standard, read with Rule 7 of the Companies (Accounts) Rules, 2014 forms part of the Annual Report. A Statement containing salient features of the financial statement of its subsidiaries in Form AOC-1 is given as Annexure-VII to this Report. The Company has no associates and joint venture companies.

Name of the Subsidiary Muthoot Housing Finance Company LimitedMuthoot

Microfin LimitedMuthoot Pappachan Technologies Limited

Nature of Business Housing Finance Microfinance Information Technology

Profit/Loss after Tax (2,11,45,797) 9,41,00,649 (53,03,461)

Share of profit/Loss due to the Company (1,59,27,014) 9,27,73,830 (31,82,077)

Dividend Declared Nil Nil Nil

DIRECTORS RESPONSIBILITY STATEMENTPursuant to Section 134 (3) (c) of the Companies Act, 2013, your Directors confirm that:

i. In the preparation of the Annual Accounts, applicable Accounting Standards had been followed along with proper explanation relating to material departures.

ii. They had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit or loss made by the Company for that year.

iii. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. They had prepared the Annual Accounts on a going concern basis.

v. The directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB-SECTION (12) OF SECTION 143 OTHER THAN WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENTNil

STATUTORY AUDITORSAs per the provisions of Section 139 of the Companies Act, 2013 the Shareholders at their Annual General Meeting held on June 3, 2014 approved the appointment of M/s. A. Cherian and Associates, Chartered Accountants, Manganam P.O, Kottayam 18, as Statutory Auditors for a period of 3 years commencing from the conclusion of the seventeenth Annual General Meeting to the conclusion of the twentieth Annual General Meeting, subject to the ratification of members at every subsequent Annual General Meeting. The Auditors have confirmed their eligibility to the effect that their appointment would be within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for re-appointment. As recommended by the Audit Committee, the Board of Directors

38

recommends the ratification of the appointment of M/s. A. Cherian and Associates, Chartered Accountants as Statutory Auditors for the FY 2016-17.

The Statutory Audit Report does not contain any qualifications, reservations or adverse remarks.

SECRETARIAL AUDITORSYour Directors have appointed M/s. SVJS & Associates, Company Secretaries, 39/3519 B, First Floor, Padmam Apartments, Manikkath Road, Ravipuram, Kochi - 682016, as Secretarial Auditors for the financial year 2015-16. The Secretarial Audit Report for the financial year ended March 31, 2016 is attached to this report as Annexure IV

The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.

EXTRACT OF ANNUAL RETURNThe extract of the annual return in Form No. MGT - 9 is attached to this report as Annexure V

FORMAL ANNUAL EVALUATIONThe Company has placed a formal evaluation framework for assessing the performance of Directors comprising of the following key areas:

i. Attendance of Board Meetings and Board Committee Meetings.ii. Quality of contribution to Board deliberations, safeguarding the interest of the Company, independence of

judgment, level of engagement and contribution.iii. Strategic perspectives or inputs regarding future growth of Company and its performance.iv. Providing perspectives and feedback going beyond information provided by the management.v. Commitment to shareholder and other stakeholder interests.

The evaluation involves self-evaluation by each Board Member and subsequently assessment by the Board of Directors. A member of the Board will not participate in the discussion of his / her evaluation.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16.

No. of complaints received : 1

No. of complaints disposed off : 1

INTERNAL FINANCIAL CONTROLSThe Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the approved policies, the safe guarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of its accounting records and timely preparation of reliable financial disclosures.

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CORPORATE SOCIAL RESPONSIBILITY (CSR)Being the CSR arm of the Company, Muthoot Pappachan Foundation (MPF) is intended to support the planning, facilitation and implementation of the CSR initiatives of the Company. MPF proposed to the Company the initiatives to be undertaken during the financial year 2015-16 with corresponding budget allocations. The CSR Committee thoroughly reviewed and recommended to the Board, the proposed action plan and budget, which has been approved by the Board. Based on the approved budget, MPF facilitated the implementation of the activities in field, both direct as well as partnership projects, ensuring stakeholder connectivity, staff engagement and people benefits.

The following key CSR initiatives were undertaken during the year:

Health

Under the flagship CSR programme of the Company, Smile Please, free surgery mission for children andyoungsters with congenital cleft issues was commenced from the previous year in partnership with Mission Smile. During the year under report, Missions were conducted across Kerala, Andhra Pradesh and Pondichery. During the year 377 kids received free cleft surgery and care and the total number of patients received surgeries through this scheme has reached 676.

Muthoot Life BloodDirectorywhichwas initiated in 2011-12 has now a strength of 64,416 registeredDonors and functioning pan India. 1026 patients were supported with blood donations adding on to Countrys voluntary blood pool.

Aashianahas completed its construction and theCentre for PhysicalMedicine andRehabilitation (PMR) isexpected to start functioning from the next financial year.

TreatmentSupportwereprovidedto92patientsfromdisadvantagedsectionsofthesociety.Supportsweregiven to patients suffering from cardiac issues, kidney patients, cancer patients and also patients with other chronic diseases.

FreeKneereplacementsurgeriesweregivento3patientsthroughMuthootLifeBrigadeHospital.

PeriodicMedicalCampswereconductedatbranchesoftheCompanyatvariouslocations.

Education

Educationsupportto19studentswereextended,supportingthemtocontinuetheirprofessionaleducation.

NotebooksweredistributedtostudentsfromdeservingbackgroundsacrossKeralaaspartofthePravesanolsavam in June 2015.

A Smart Class was donated to Govt. Lower Primary School, Thiruvallam. This school is functioning in the fishermen region in Trivandrum region.

Livelihood

MPF in partnershipwith renownedNGO Aide et Action, collaboratingwith their iLEAD project started aVocational Training Center in Kerala. First MPF iLEAD Center at Trivandrum started during the year under report offering the course in Hospitality trade. The seats are offered to candidates from deserving backgrounds enabling them to pursue the course free of cost and then find a livelihood.

ErnakulamCricketClubiscontinuouslysupportedtowardsprovidingprofessionalcoachinginCrickettothebudding talents and also to provide them opportunities to play in professional matches. Special attention is given to include aspiring players from challenging backgrounds.

Housingassistancewasgiventoawidowfromfinanciallypoorbackgrounds.

During the year the Company has spent ` 1.88 Cr on CSR activities.

The Annual Report on CSR activities is annexed herewith vide Annexure VI

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RISK MANAGEMENTOverview

The company is exposed to risks that are inherent to the industry in which it operates. The companys comprehensive risk management processes ensures that these risks are identified on a timely basis and addressed.

The risk management framework of the Company encompasses policies and procedures relating to the identification, assessment, monitoring, control and mitigation of credit, strategic, operational, and liquidity risks for achieving our key business objectives and is backed by Internal Audit and Inspection. This seeks to create transparency, minimises the adverse impact of risks to our key business objectives and enables the company to leverage market opportunities effectively.

The Board of Directors have constituted a Risk Management Committee. The Committee has adopted a charter that outlines the role, responsibilities and powers of the Committee and the procedures for organising the meeting of the Committee.

Risk Management Framework

Our risk management framework works at various levels across the enterprise. The key roles and responsibilities regarding risk management in the company are summarised as follows:

Level Key roles and responsibilitiesBoard of Directors

Corporate governance oversight of risk management Review the performance of the Risk Management Committee

Risk Management Committee

Comprises of one independent Director as its Chairman, the Managing Director and the Executive Director

Responsibilities include Assisting the Board in the articulation of its risk appetite; Overseeing the implementation and maintenance of a sound system of risk management

framework which identifies, assess, manages and monitors risk; Recommend to the Board clear standards of ethical behaviour required of Directors and

employees and encourage observance of these standards Examining and determining the sufficiency of the Companys internal processes for reporting

and managing key risk areas.

Risk Management Department

Comprises of the Branch Audit and Inspection (BAI) Department and Corporate Internal Audit Department

Responsible for Facilitating the execution of risk management practices in the enterprise as mandated, in the

area of risk identification, assessment, monitoring, mitigation and reporting Providing quarterly updates to the Risk Management Committee on top risks and their

mitigations Working closely with owners of risk in deploying risk mitigation measures and monitoring

their effectivenessDepartment and Unit Heads

Responsible for managing their functions as per the Companys risk management philosophy Responsible for managing risks concomitant to the business decisions relating to their

department or unit Manage risks at the unit level that may arise from time to time in consultation with the Risk

Management Department

Staff Adhering to the risk management policies and procedures Implementation of prescribed risk mitigation actions Reporting risk events and incidents in a timely manner

Key business objectives

The Board periodically revalidates the strategic themes and business objectives of the company and ensures that there is a balance between short and medium term goals. The corporate performance is measured, monitored and managed on an ongoing basis.

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The focus of risk management is to assess risks to the achievement of these key business objectives and deploy mitigation measures.

Risk categories

Following are the broad categories of risks to the business objectives in our risk management framework:

a. Strategic: These risks originate from the choices we make on markets, business mix, resources that can potentially impact our competitive advantage in the medium and long term.

b. Credit Risk: Substantial part of the credit exposures is in the form of secured loan and the Company has a system for on-going monitoring of collaterals. For the non-collateralized credit exposures, the Company has instituted well defined credit administration process and monitoring procedures.

c. Counterparty: Risks arising from our association with entities for conducting business. The counterparties include our customers, vendors etc. Counterpart risks include those relating to litigation and loss of reputation.

d. Resources: Risks arising from inappropriate sourcing or sub-optimal utilisation of key organisational resources such as financial capital, talent and infrastructure.

e. Operations: Risks inherent to business operations including those relating to customer acquisition, physical security, information security and business activity disruptions. Operational risks are managed primarily on three dimensions - business process effectiveness, compliance to policies and procedures and strength of underlying controls.

f. Regulatory environment: Risks due to adverse developments in the regulatory environment that could potentially impact our business objectives.

Branch Audit and Inspection (BAI)

BAI is primarily responsible for the following functions:

1. Internal audit of branches. The internal audit of the Branches are conducted by Internal Auditors. The Company has an approved strength

of 201 Internal Auditors.2. Inspection of gold (both weight and quality) at the branches. The inspection of gold at the Branches are done by Gold Inspectors. The Company has an approved strength of

300 Gold Inspectors.

Corporate Internal Audit

The Corporate Internal Audit is responsible for evaluating and providing assurance to the Board of Directors and Executive Management on the effectiveness of the Companys Internal Control, Risk Management and Governance Processes. This involves reviewing the effectiveness and efficiency of all business processes and their compliance with the Companys policies, standards and procedures and all applicable laws and regulations.

Other measures

To improve the efficiency of risk management function and also to draw upon specialist skill sets, the Company also utilizes the services of outside consultants to perform certain engagements relating to the risk management/audit activities.

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CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGOThe Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 in regard to:

(a) Conservation of energy: Not applicable, in view of the nature of the business of the Company being Financial Services

(b) Technology Absorption: The Company is steadily applying and adopting technology to improve services efficiently, and

(c) Foreign Exchange earnings and outgo: The Company has no foreign exchange earnings. There was an outgo of foreign exchange of `9.58 Lakhs.

MANAGEMENT DISCUSSION AND ANALYSIS REPORTManagement Discussion and Analysis Report is attached and forms an integral part of the report of the Board of Directors.

ACKNOWLEDGEMENTYour Directors are grateful to the Central Government, the State Government, the Reserve Bank of India, the Registrar of Companies, Kerala, Securities and Exchange Board of India and other Regulatory Authorities, Bankers, Financial Institutions, Vendors and Customers for their continued support, co-operation and guidance. Your Directors expresses their deep sense of appreciation for the committed services of the Employees of the Company. Finally, the Directors wish to express their gratitude to the Shareholders for their trust and support.

For and on behalf of the Board

sd/-Thomas John Muthoot

Managing DirectorThiruvananthapuramDated: 27.09.2016

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MANAGEMENT DISCUSSION AND ANALYSIS REPORTEconomic Outlook

There was significant volatility in global markets during financial year 2015-16 (FY16) with commodities moving to low levels and the Chinese economy facing an unprecedented slowdown. Global macro growth has been weak, although there was some momentum at the early stages of the year. The US Federal Reserve finally increased the Fed Funds Rate by 25 bps in December 2015. There after it kept the interest rate stable in the subsequent monitory policy statement and indicated that the rate increase would be gradual. The Commodities market saw huge selling pressure in FY16 due to oversupply worries and weak demand in China. Brent Crude price touched a 12-year low of $27.36 because of continued OPEC supply and anticipation of increased supply from Iran. However, prices stabilised at around $40 levels on rumours of production cuts by Saudi Arabia and Russia. Chinas economy grew at its slowest rate in 25 years. The growth was 6.9% in the calendar year (CY) 2015 as against the growth of 7.3% in CY 2014. The European Central Bank cut interest rate in the Eurozone to zero, and reduced a key deposit rate further into negative territory to - 0.4% to revive the economy and ward off deflation. The Bank of Japan also adopted negative interest rates in January 2016. During FY16, Government Bonds by several Countries, were also issued with yields below zero. Several emerging market economies saw a depreciation of their currencies during FY16.

India recorded an impressive GDP growth of 7.5% which was almost equal to the initial Government projections. It is worth mentioning that the Consumer Price Index (CPI) averaged around 4.9% in FY16 as against 6.25% in FY15 because of a steep fall in Commodity and Crude prices and better food supply management. This was despite the adverse fact that FY16 was the second straight year of deficient rainfall. The CPI has been well within RBIs projected range, providing room for cuts in interest rate and maintaining of an accommodative stance to aid growth. The Index of Industrial Production (IIP) data was erratic throughout the year, and did not yield any definite trend in manufacturing, though the Infrastructure Output Index showed some recovery. Indian Rupee moved lower to 68.12 against the US Dollar, due to continued strengthening of the US Dollar and depreciation of the Yuan. But on relative basis it was one of the best performing currencies in the Emerging market. INR was trading at 66.56 against a US Dollar on March 31, 2016. Indias forex reserves were at a comfortable level of $354bn, up by $14bn from the previous year.

The year started with RBI keeping the policy rates steady in its first bi-monthly policy on April 7, 2015 and maintained an accommodative stance for future actions. The repo rate was, later, reduced to 7.25% from 7.50% in June 2015 and further to 6.75% in September 2015. This was in addition to the cut of 50 bps done prior to March 2015. In April 2016, RBI has reduced the repo rate by a further 25 basis points to 6.5%. RBI also took steps to tackle the growing NPA issues in the banking system and the banks were directed to make provisions for all the bad loans and clean up their books by March 2017.

Inflation remained moderate during FY16. Retail inflation as measured by Consumer Price Index reduced to 3.7% in July-August 2015 from 5.3% in March 2015. Subsequently it increased to 4.7% in March 2016. Inflation as measur